EU launches transitional phase of CBAM, world's first carbon tariff


The European Union launched on October 1 the first phase of the world's first system to impose CO2 emissions tariffs on imported steel, cement, and other goods as it tries to stop more polluting foreign products from impeding its green transition.

The carbon tariff has caused disquiet among trading partners and at a forum last month, China's climate envoy XieZhenhu a urged countries not to apply unilateral measures such as the EU levy.

The bloc will not begin collecting any CO2 emission charges at the border until 2026.

However, this month marks the start of an initial phase of the Carbon Border Adjustment Mechanism (CBAM) when EU importers must report the greenhouse gas emissions embedded during the production of imported volumes of iron and steel, aluminum, cement, electricity, fertilizers and hydrogen.

Start from 2026, importers will need to buy certificates to cover these CO2 emissions to put foreign producers on a level footing with EU industries that must buy permits from the EU carbon market when they pollute.

European Economy Commissioner Paolo Gentiloni said the aim was to encourage a global shift to greener production and to prevent European manufacturers relocating to countries with lower environmental standards.

It is also aims to prevent them from losing out to foreign competitors while they invest in meeting EU targets to reduce emissions by 55% by 2030 from 1990 levels.

"CBAM is not about trade protection. It is about protecting the EU's climate ambition – and seeking to raise the level of climate ambition worldwide," Gentiloni said.

The European Commission indicates the border levy is in line with World Trade Organization regulations in that it treats foreign and domestic firms alike and allows deductions for any carbon prices already paid abroad.

Eurofer, the European steel industry association which has been at the forefront of those in Europe seeking a border tariff, said the initial phase would test how watertight CBAM is at avoiding industrial production shifting abroad to countries with less ambitious climate policies.

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